by Calculated Risk on 3/03/2015 02:36:00 PM

Based on a WardsAuto estimate, light vehicle sales were at a 16.16 million SAAR in February. That is up 5.4% from February 2014, and down 2.4% from the 16.55 million annual sales rate last month.  The comparison to February 2014 was easy (sales were impacted by the severe weather last year).

From John Sousanis at Wards Auto: February 2015 U.S. LV Sales Thread: SAAR Falls to 10-Month Low

U.S. automakers sold 1.252 million light vehicles in February, a 5.4% increase in daily sales that left the seasonally adjusted annual sales rate (SAAR) at a 10-month low of just 16.16 million-units.
...
Historic cold in parts of the country likely played a role in the shortfall, along with lower than expected fleet sales and some inventory shortages of key models.

GM was the No.1 auto seller in February, accounting for 18.5% of sales, followed by Toyota (14.4%) and Ford (14.1%).

Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for February (red, light vehicle sales of 16.16 million SAAR from WardsAuto).

This was below the consensus forecast of 16.7 million SAAR (seasonally adjusted annual rate).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

Although below consensus, this was the tenth consecutive month with a sales rate over 16 million.

by Calculated Risk on 3/03/2015 12:29:00 PM

CR Note: The following is a post I wrote in January 2007 that is hopefully worth repeating.  I warned about always being short term bearish, even though most of my posts were very bearish back then!  I was predicting a recession would start in 2007 (the Great Recession started in December 2007), however I was still optimistic about the future.

In the comments, and occasionally via email, people have expressed surprise at my positive long term outlook. This reaction is probably understandable since most of my posts have a bearish economic tone.

In my view, both history and logic suggest that the economic future will be brighter. Economic growth has been the norm, and in the long term, the markets almost always reward the bullish investor.

It's human nature to be concerned about specific events, but historically the economy has recovered quickly from trauma. Concerned about the bird flu? Look at the 1918 flu pandemic that was followed by the Roaring '20s. Concerned about an economic Depression? The Great Depression was the worst economic event in recent times, and the economy was fine after WWII.

These are serious, but relatively short term events for the general economy.

Logically this makes sense. Economic growth is dependent on innovation and population growth. And innovation will almost certainly continue. In fact, the only real threats to the long term economy are massively destructive events (like a major meteor strike) and impediments to innovation.

It's not worth worrying about very low probability events like super volcanoes or meteor strikes. However higher probability events, like the potential impact from global warming, is probably a concern. But once again, even with global warming, innovation will most likely (hopefully) save the day.

I'll discuss possible impediments to innovation in a future post.

So why are my posts generally bearish? Simple - because I am writing about the short term. And in the short term I'm concerned about the impact of the housing bust on the general economy. And a short term aberration (a recession) to the long term trend is interesting and worth discussing. Clearly I'm bearish in the short term, and I feel the "odds of a recession" in 2007 "are at least a coin flip".

But we have to guard against always being short term bearish and long term bullish. That doesn't work from an investment perspective, since we will always be cautious in each successive short term - and the sum of many short terms is the long term. Intelligent people can always make a strong short term bearish argument, so a pattern of always being short term bearish is a serious risk - just something to consider.

Luckily, as I've been noting for some time, we will probably know by mid-2007 if the housing bust is going to significantly impact the general economy. I believe it will, so the next few months should be interesting.

Best to all.

by Calculated Risk on 3/03/2015 10:05:00 AM

Notes: This CoreLogic House Price Index report is for January. The recent Case-Shiller index release was for December. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: Home Prices Up 5 Percent Year Over Year for December 2014

CoreLogic® ... today released its January 2015 CoreLogic Home Price Index (HPI®) which shows that home prices nationwide, including distressed sales, increased 5.7 percent in January 2015 compared to January 2014. This change represents 35 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased by 1.1 percent in January 2015 compared to December 2014.

Including distressed sales, 27 states and the District of Columbia are at or within 10 percent of their peak. Four states, New York (+5.6), Wyoming (+8.3 percent), Texas (+8.3 percent) and Colorado (+9.1 percent), reached new highs in the home price index since January 1976 when the index starts.

Excluding distressed sales, home prices increased 5.6 percent in January 2015 compared to January 2014 and increased 1.4 percent month over month compared to December 2014. ...

“We continue to see a strong and progressive uptick in home prices as we enter 2015. We project home prices will continue to rise throughout the year and into 2016,” said Anand Nallathambi, president and CEO of CoreLogic. “A dearth of supply in many parts of the country is a big factor driving up prices. Many homeowners have taken advantage of low rates to refinance their homes, and until we see sustained increases in income levels and employment they could be hunkered down so supplies may remain tight. Demand has picked up as low mortgage rates and the cut in the FHA annual insurance premium reduce monthly payments for prospective homebuyers.”
emphasis added

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 1.1% in January, and is up 5.7% over the last year.

This index is not seasonally adjusted, and this was a solid month-to-month increase.


The second graph is from CoreLogic. The year-over-year comparison has been positive for thirty five consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

The YoY increase has mostly moved sideways over the last six months.

by Calculated Risk on 3/02/2015 07:58:00 PM

On mortgage rates from Matthew Graham at Mortgage News Daily: Mortgage Rates Back up to 3.875 Percent

What had been 3.75% on Friday is now 3.875% in terms of the most prevalent conventional 30yr fixed rates for top tier scenarios.

CR Note: The Ten Year yield increased to 2.08% today from 2.00% on Friday.

Tuesday:
• All day, Light vehicle sales for February. The consensus is for light vehicle sales to increase to 16.7 million SAAR in February from 16.6 million in January (Seasonally Adjusted Annual Rate).

• At 8:15 PM, Speech, Fed Chair Janet L. Yellen, Bank Regulation and Supervision, At the Citizens Budget Commission's Annual Awards Dinner, New York, New York

by Calculated Risk on 3/02/2015 03:13:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined slightly in January to 1.86% from 1.89% in December. The serious delinquency rate is down from 2.33% in January 2014, and this is the lowest level since September 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Last week, Freddie Mac reported that the Single-Family serious delinquency rate was declined in January to 1.86%. Freddie's rate is down from 2.34% in January 2014, and is at the lowest level since December 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

The Fannie Mae serious delinquency rate has fallen 0.47 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will be under 1% in late 2016.

The "normal" serious delinquency rate is under 1%, so maybe serious delinquencies will be close to normal at the end of 2016.  This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog, especially in judicial foreclosure states like Florida.